NIL Newsletter #138 | Special Edition: Johnson v. NCAA + ICYMI
Welcome to the NIL Newsletter by Optimum Sports Consulting - providing valuable, actionable NIL resources for student athletes, administrators, agents and other sport professionals.
Johnson v. NCAA
Today’s newsletter will focus on the recent hearing for Johnson v. NCAA. Additional NIL news from the week can be found under the “In Case You Missed It” heading at the bottom.
Background
In November 2019, former Villanova football athlete Ralph “Trey” Johnson sued the NCAA and around two dozen Universities for violations of the Fair Labor Standards Act (“FLSA”). Johnson alleged that student-athletes should be recognized as employees of their university under the FLSA, and that the NCAA was a joint employer of all student athletes.
In the past 2 years, the case grew to include a number of other current or former student-athletes.
The case was filed in the Eastern District of Pennsylvania, a federal trial court, where Judge Padova ruled against several motions to dismiss made by the NCAA.
The Third Circuit Court of Appeals, where the hearing occurred this pasty week, will decide whether student-athletes can be considered employees, before the case is remanded to the District Court to determine if student-athletes are employees.
The significance of a Third Circuit decision in favor of Johnson is not to be understated. If the Third Circuit determines that student-athletes can be considered employees, it will put the Court at odds with the Seventh and Ninth Circuits. Previous cases in both circuits determined that student-athletes cannot be considered employees.
Johnson’s Argument
The crux of Johnson’s case rests on a simple comparison between student-athletes and students who are already considered employees of the school.
“One of the things they used to always tell us was this idea that you can’t be both a student and an employee,” Paul McDonald, lead attorney for the plaintiffs, said. “The problem is, there have always been students on campus who are also employees of the college. … It’s a matter of recognizing that the basic lie that has been told by the NCAA and school is that — a lie.
There are significant and simple parallels between student employees on academic scholarships and student-athletes on athletic scholarships.
NCAA’s Defense
The NCAA leans heavily on precedent, which is tilted significantly in their favor. Johnson’s argument is predicated on policy, while the NCAA has the weight of legal precedent on their side.
The NCAA points to Berger v. NCAA, where the Seventh Circuit ruled that former University of Pennsylvania student-athletes could not be considered employees of the school.
The NCAA places a heavy emphasis on amateurism in collegiate sports. This seems misplaced in light of Name, Image, and Likeness compensation emerging across the nation.
Oral Arguments
Oral arguments took place in front of a three-judge panel for the Third Circuit Court on Wednesday, February 15th. A decision is expected in late spring or early summer.
The NCAA did not fare well in the hearing, as the judges continually shot down their arguments.
Judge Restrepo went as far as to ask: “How are [student-athletes] not employees of the universities given the regimes they report to?”
At least two of the judges distinctly called out the decision in Berger v. NCAA, stating that student-athletes are referred to as amateurs simply because the NCAA has called them amateurs.
“The judges definitely have a nuanced understanding of the collegiate model and the way in which it’s been shifting,” said lawyer Sarah Wake. “Their questions suggested that they think student-athletes should be considered employees for purposes of the Fair Labor Standards Act — at least at this stage in the case.”
The panel of judges pointed to a number of other arguments for the classification of student-athletes as employees, including: time commitments, gender equity issues, NIL deals, and massive media deals signed by universities.
Takeaways
From what has been reported to the public, it appears as though the official decision from the Third Circuit is but a formality. The most likely outcome is a ruling that student-athletes can be considered employees of the university they attend. From there, the case will be remanded to the District Court, where Judge Padova will decide if student-athletes are employees.
While we are still months, if not years, from an official decision, the Third Circuit hearing is a strong indication that tides are shifting away from the amateurism model of the NCAA. Whether it is because of a court’s decision, new legislation, or institutional reform, we are likely only a few years away from the end of collegiate amateur sports as we know it.
ICYMI Ticker
Colorado Head Football Coach Deion Sanders and his family appeared in a Super Bowl commercial. His son Shedeur Sanders was likely the first collegiate student-athlete to appear in a Super Bowl ad in the time of NIL. LINK
On3 CEO Shannon Terry shared his thoughts on NIL Collectives and funding: “Across the board, Collectives/Schools are becoming more efficient and staunch in Value and boundaries. Funding will be lower than the Collectives previously communicated goals. There's no such thing as the term being floated ‘infinite salary cap’ in NIL. Every Collective/School has a pain threshold. We see the majority of the elite programs somewhere in the $4-$6M deployed range next 12 [months].” LINK
18% fewer athletes declared early for the 2023 NFL draft than declared in 2022, a sign of the effect of NIL on returning to school. LINK
Kansas City partnered with INFLCR to launch the KC Roos Exchange for student-athletes to connect with NIL opportunities. LINK
Texas A&M’s 12th Man Foundation, a University booster group, is accepting NIL-related donations. Donors who contribute over $5,000 receive an invitation to an annual NIL event. LINK
The USC-focused Tommy Group collective launched and has already partnered with Heisman Winner Caleb Williams. LINK
At the same time, BLVD LLC, another USC-focused collective, announced that they shut down their day-to-day operations. LINK
Governor Ron DeSantis signed House Bill 7B, discussed in last week’s newsletter. LINK